European Nickel Acquire Strategic Interests in Philippine Nickel
Laterite Projects
European Nickel to Acquire Strategic Interests in Philippine Nickel
Laterite Projects for US$48.0 million
Highlights:
Acquisition of 19.3% interest in Toledo and 18.7% direct interest in
Berong Nickel Corporation (effective 29.5% interest in BNC)
Deposits amenable to European Nickel's heap leach process
Deposits have laterite nickel mineralisation of over 375 million
tonnes at around 1.3% nickel for 4.9 million tonnes of contained
nickel (Toledo estimates)
Positive cashflow from Direct Ore Shipping at Berong with significant
expansion potential from modest capital investment
Purchase price to be paid in cash and/or shares
23 May 2008 - London: European Nickel PLC ("European Nickel" or the
"Company") (AIM: ENK) is pleased to announce the acquisition from
Investika Limited ("Investika") (ASX, AIM: IVK), Chris Kyriakou
(Chairman of Investika and Toledo Mining) and Murray Morgan
Investments Ltd of a 19.3% interest in Toledo Mining Corporation PLC
(AIM: TMC) ("Toledo") and, from Investika, an 18.7% direct interest
in the Berong Nickel Corporation ("BNC") in the Philippines for a
total consideration of US$48.0 million.
Toledo has a 56.1% direct and indirect interest in BNC, which holds
the Berong, Moorsom and Long Point nickel laterite deposits (each of
which are 100% owned by BNC). In addition, Toledo also has a 52%
interest in the Ipilan and a 58% interest in the Ulugan nickel
laterite deposits.
This transaction significantly expands European Nickel's strategic
nickel laterite interests in the Philippines with two large deposits
which initial testing has shown to be amenable to heap leaching.
Toledo has estimated the four deposits of laterite nickel
mineralisation consist of over 375 million tonnes at around 1.3%
nickel with a total nickel content of more than 4.9 million tonnes
(approximately 1.2 million tonnes attributable to European Nickel).
The directors believe that the deposits have strong potential to
significantly grow beyond the current JORC resource of 9.92 million
tonnes at 1.55% nickel (June 2007), estimated for the MPSA area being
mined at Berong.
BNC is currently generating positive cashflow through direct ore
shipping ("DOS") to Australia and China from the Berong operations
and funds are likely to be re-invested into BNC to further expand and
develop the operations.
Commenting on the acquisition, Simon Purkiss, Managing Director of
European Nickel, said "Whilst the Caldag project in Turkey remains
our primary near-term production priority, we are very excited by the
long-term growth potential of the Philippines. This acquisition is in
line with our strategy to increase our critical mass, whilst further
advancing our objective to become a mid-tier, low cost nickel
producer.
"The competitive edge offered by the potential of our simple, low
cost, heap leach process is again demonstrated through this
transaction, as we are able to access good grade laterite deposits
through the provision of our process technology. Our regional test
facility on Luzon Island will start testing bulk laterite ore samples
from both our Acoje and the Berong deposits this year.
"We look forward to working with our partners in the Philippines to
progress the projects further towards full scale commercial
production. At Berong there is an opportunity to considerably
increase output of the DOS operation for relatively modest capital
expenditure, while the surrounding areas are proved up to JORC status
in preparation for subsequent on-site processing. At Ipilan, a JORC
resource upgrade is targeted by the end of this year."
The Transaction
European Nickel will acquire a total of 5,691,019 shares (19.3%) in
Toledo for a total of £11.4 million (US$22.2 million) at £2.00 per
share. The Toledo shares will be purchased from:
(i) Investika (3,391,019 Toledo shares);
(ii) Chris Kyriakou, Chairman of Toledo and Investika (1,550,000
Toledo shares); and
(iii) Murray Morgan Investments Ltd (750,000 Toledo shares),
(together "the Toledo Sellers")
In addition, European Nickel will acquire from Investika an 18.7%
interest in BNC for US$24.4 million. The Company is also acquiring
from Investika an 18.7% interest in China Nickel Corporation, a
nickel marketing company, for nominal consideration and is being
assigned a US$1.3 million receivable from BNC.
European Nickel will fund the transaction using £4.6 million (US$9.0
million) from existing cash resources payable upon the agreement
becoming unconditional.
The payment of the balance of the purchase price is deferred until 30
September 2008, whereupon the Sellers will receive either European
Nickel shares priced at 55p per share equivalent to the outstanding
consideration (if the 20 day volume weighted average price ("VWAP")
is greater than 60p) or, if the price is below 55p, US$39.0 million
in cash. If the VWAP is in-between 55p and 60p, the Sellers may elect
to accept either shares or cash. The maximum number of shares that
could be issued under these arrangements is 36,390,909 shares, some
9.4% of the Company's current issued share capital.
The transaction is subject to the satisfaction of various conditions
including (i) Toledo and Atlas Consolidated Mining and Development
Corporation ("Atlas") not exercising certain pre-emption rights they
have on Investika's holding in BNC, and (ii) the shareholders of
Investika having approved the transaction, for the purposes of the
AIM Rules, at a general meeting of Investika.
In the event European Nickel shares are issued and the Sellers wish
to sell any of these shares, the Sellers have undertaken to use their
best endeavours to dispose of the shares through European Nickel's
broker in an orderly manner within 12 months of being issued the
shares. If the proceeds of such a disposal exceed 55p per share, then
the Sellers and European Nickel will share the excess (less costs of
sale) equally.
On conclusion of the transaction two nominees of European Nickel will
be invited to join the Board of Toledo.
During the six month period to 30 September 2007, Toledo reported
unaudited consolidated net profits of £1.8 million. For the same
period, its associate BNC's revenues were £12.3 million with profits
of £5.1 million.
European Nickel is being advised by RBC Capital Markets.
The Projects
European Nickel believes Toledo and Investika, and their Philippine
partner Atlas, hold one of the few large packages of nickel laterite
deposits in the hands of junior mining companies in the world. The
deposits are all located on Palawan Island, in the south-west of the
Philippines, and offer the potential to recover both limonite and
saprolite ore.
Atlas is listed on the Philippine Stock Exchange (PSE: AT) and has
been operating in the Philippines for over 50 years. Atlas has an
effective 25.2% holding in BNC and 42% holding in the Ulugan project.
It is currently completing the rehabilitation of the Carmen copper
mine near Toledo City on Cebu Island in the Philippines, which will
come into production during the third quarter of this year.
Toledo has a 56.1% indirect economic interest and Investika an 18.7%
interest in the Berong, Moorsom and Long Point deposits. Berong
currently has a JORC resource of 9.92 million tonnes at 1.55% nickel
(June 2007) within the MPSA area currently being mined and, according
to Toledo, this forms part of the approximately 275 million tonnes of
nickel mineralization at around 1.3% nickel within the three
deposits.
The Berong deposit is currently being mined with ore being shipped
direct to BHP Billiton's Yabulu refinery in Queensland, Australia
under a 500,000 wet metric tonne per annum ore supply contract and to
the Chinese market on a spot basis. Current export grades are 1.5%.
European Nickel believes that, with a moderate amount of further
investment, the level of export sales could be substantially
increased.
Toledo is currently examining the potential of various alternative
metallurgical process routes for the on-site processing of its
deposits. Initial bottle roll tests confirm that the ore from Berong
and Ipilan is amenable to European Nickel's heap leach process.
European Nickel plans to take bulk samples to its heap leach test
facility, which it is constructing on Luzon Island, for large scale
testing to demonstrate the amenability of the ore to heap leach
extraction. This work will be run alongside test work on ore from the
Company's joint venture with Rusina Mining NL at Acoje.
The Ipilan/Celestial project has been extensively drilled to bring it
to a JORC classification, which is anticipated by Toledo to be
completed during the third quarter of 2008. Toledo's internal
estimates indicate a resource of over 100 million tonnes at around
1.25% nickel. A DOS operation at Ipilan is also planned to complement
the Berong DOS operation. Project activities undertaken by Toledo
during the first quarter of 2008 included environmental studies,
obtaining the necessary permits and approvals and site planning of
key infrastructure facilities, such as stockpile areas, access roads
and a causeway.
The Ulugan deposit in north-eastern Palawan consists of two
exploration permit applications, which have yet to have any
significant exploration work carried out on them.
European Nickel Conference Call on Friday 23 May at 11am UK time
Simon Purkiss, Managing Director and Andrew Lindsay, Finance Director
of European Nickel will host a conference call tomorrow at 11am UK
time. A presentation will be available from the European Nickel
website: www.enickel.co.uk.
To access the call, please dial-in at least 10 minutes beforehand,
quoting the reference: 484720#
UK Toll Free 0800 358 2705
UK +44 20 8609 0205
US Toll Free 1866 793 4279
US Access Number +1 703 621 9126
Canadian Toll Free 1866 270 8076
Canadian Access Number +1 514 315 1023
A replay will be available after the call for a period of seven days.
This can be accessed via the European Nickel website,
www.enickel.co.uk or by dialling:
Playback Telephone No. 0800 358 2189 or +4420 8609 0289
Conference Reference 217637#
For more information, please visit www.enickel.co.uk or contact:
Simon Purkiss or Andrew Lindsay, European Nickel
Tel: 020 7290 3130
Mike Jones or Andrew Chubb, Canaccord Adams
Tel: 020 7050 6500
Peter Barrett-Lennard or Sarah Wharry, RBC Capital Markets
Tel: 020 7653 4093
Alex Buck, BuckBias
Tel: 020 7244 8053 or Mobile: 07932 740 452
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